Chapter 1: The dynamics of business and economics.

Sheldon Company had beginning retained earnings of $1,000, net income of $5,000, and dividends of $250. The ending balance in the retained earnings account is

$1,000 beginning balance + $5,000 net income - $250 dividends = $5,750.

Jacob's Chocolates had beginning retained earnings of $4,000; net income of $10,000; and dividends of $300, calculate the ending balance in the retained earnings account.

$4,000 beginning balance + $10,000 net income - $300 dividends.

Boaz Company had beginning of year assets of $100 million and end of year assets of $120 million. Boaz's net income is $5 million. Calculate Boaz Company's return on assets. Round your answer to 1 decimal place.

$5 million/[($100 million + $120 million/)2] = 4.5%

Financial statments

1. Income statement 2. Statement of retained earnings 3. Balance sheet 4. Statement of cash flows.

What are the four functions of management?

1. Planning 2. Organizing 3. Leading 4. Controlling

Data visualization

A graphical presentation of data to help in understanding their significance

Who stated that competition fosters efficiency and low prices by forcing producers to offer the best products at the most reasonable price?

Adam Smith

Accounting Equation

After recording the transaction, total assets will always equal total liabilities plus equity. The accounting equation must always remain in balance.

Pressure

An employee that is having trouble paying his personal bills might exhibit the following fraud factor.

______ forces producers to offer the best products at the most reasonable price; those businesses that are unable to do so will not be able to stay in business.

Competition

Affect equity

Dividends Common stocks Expenses Revenues

______ causes the standard of living to rise because more people are employed and have money to spend.

Economic expansion

______ occurs when an economy is growing and people are spending more money. Their purchases stimulate the production of goods and services, which in turn stimulates employment.

Economic expansion

______ is the study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals.

Economics

Of the various elements that allow one to be successful in business, which one is based in part on personal insight and understanding?

Good judgment

What four questions should you consider when determining whether an action is ethical?

How does this activity fit with your own beliefs and values? Are there legal restrictions? Would this activity be accepted by your co-workers? Is this action customary in your industry?

Accounting

It identifies, records, and communicates business transactions.

Which person is engaged in a misuse of company time?

Joel spends an hour or more a day surfing the web and checking his social media sites.

Return on asset

Net income / average total assets.

Laws regulating safety in the workplace are enforced by

OSHA

FASB conceptual framework

Objectives Qualitative characteristics Recognition and measurement Elements

What do studies show about the relationship between social responsibility and profitability?

Social responsibility is associated with improved business performance.

Balance sheet

Supplies Accounts payable Retained earning Cash Equipment

______ refers to the methods and processes creating applications to solve problems, perform tasks, and make decisions?

Technology

Generally Accepted Accounting Principles

The concepts and rules that govern financial accounting practice.

profit

The difference between what it costs to make and sell a product and what a customer pays for it is defined as

accounting equation

The equation applied to all transactions and events. The equation reflects that the total of what a business owns at any point in time will equal the total of what it owes creditors and owners. The euqation states that Assest = Liabilities + Equity The relation of assest, liabilities and equity is reflected in the equation.

Why is the American economic system best described as modified capitalism?

The government regulates business to preserve competition and protect consumers and employees.

What is most likely to happen to firms which consider the interests of all stakeholders while conducting their operations in an ethically and socially responsible manner?

They will enjoy the profitable financial performance.

Accounting is important

We live in an information age whereby accounting information impacts everyone.

Entrepreneur

______ is an individual who risks wealth, time, and effort to develop for profit an innovative product or way of doing something.

Deke's Camping World provides camping and outdoor equipment to satisfy the needs of its customers all while trying to earn a profit. Thus, Deke's Camping World would be classified as

a business

Asset

a resource that a business owns or controls

Physical threats, false accusations, use of profanity, and yelling at others all fall under which category of organizational misconduct?

abusive behavior

Which behavior is the most common ethical problem for employees?

abusive behavior

______ economy, people were self-sufficient and produced everything they needed at home, including food, clothing, and furniture. Abundant natural resources and a moderate climate nourished industries such as farming, fishing, shipping, and fur trading.

agricultural

Assest

an amount owned. resources controlled by the business. resources with expected future benefits.

code of ethics

are formalized rules and standards describing expected employee behavior.

Why is ethical decision making difficult?

because there are always gray areas that create dilemmas

Money given in exchange for a special favor is called a and benefits an individual or a company at the expense of other stakeholders.

bribery

Payments, gifts, or special favors intended to influence the outcome of a decision are considered

bribery and are unethical

Multiple Choice Question Although sexual harassment has legal recourse, workplace Blank______ has little legal recourse at this time.

bullying

What type of behavior creates a hostile workplace environment but has little legal recourse?

bullying

______ is/are principles and standards that determine acceptable conduct in business.

business ethics

The formalized rules and standards describing expected employee behavior are outlined in

codes of ethics

Balance sheet

common stock equipment accounts receivable

The rivalry among businesses for consumers' dollars is referred to as

competition

This exists when a person must choose whether to advance one's own personal interests or those of others.

conflict of interest

Which ethical issue is being exhibited by a manager that makes decisions which profit him personally rather than profiting the firm and its investors?

conflict of interest

The activities that independent individuals, groups, and organizations undertake to protect their rights as consumers are called

consumerism

The quantity of products that people are willing to buy at different prices at a specific time is called

demand

Knowing the importance of employee relations, what is the likely result of a company that does not listen to employee grievances or treat employees fairly?

difficulty in attaining company goals

New technology associated with artificial intelligence has resulted in Blank______ technology that has the ability to communicate and make decisions like humans.

disruptive

An external user of accounting information

does not directly run the organization

Businesses must first be responsible to their owners, who are primarily concerned with

earning a profit

How a particular society distributes its resources to produce goods and services describes a(n)

economics

An identifiable problem, situation, or opportunity that requires a person to choose between actions that may be evaluated as ethical or unethical is called a(n)

ethical issue

Jarek is short of his sales goal this month. He knows if he adds small items to his customer's orders, they most likely won't notice the small increase and then he would be able to make his goal. His only other choice is to accept he hasn't met the goal and will lose some of his commission. This exemplifies a(n)

ethical issue

Fairness and honesty are at the heart of business and relate to the general values of decision makers.

ethics

What term refers to the standards and principles used by society to define appropriate and inappropriate conduct in the workplace?

ethics

Your text notes that to be successful in business, you need which of the following?

experience skills good judgment knowledge

Statement of Retained Earnings

explains changes in equity from net income ( or loss) and from the dividends over a period of time

Studying business does not offer any benefits for those who decide to work for a government agency or a nonprofit organization.

false

Income statment

first financial statment to be prepared.

An organization's ability to achieve its business is directly affected by society's views on the actions of the business, even if the business is judged incorrectly.

goals

A manufacturer made the decision to buy less expensive materials from another supplier which resulted in the reduced quality of its products. As a result, company sales dropped and many retailers refused to carry the product line. This is an example of

how negative impressions of a business can affect its ability to achieve its goals

Prior to the American economy developing into an agricultural economy, Native Americans lived in a(n) Blank______ economy with some trade among tribes.

hunter/gatherer

What two outcomes are usually enjoyed by companies with good ethical behavior?

improved profits enhanced company reputation

According to your text, ethical decisions in organizations are influenced by which three key factors?

individual moral standards and values the opportunity to engage in misconduct the influence of managers and co-workers

Select from the following the typical actions of consumerism.

lobbying government agencies making public service announcements boycotting companies writing letters to companies

In a free-enterprise system, dictates whether or not a business will succeed or fail.

market demand

A business's primary obligation to its owners and investors is to

maximize the owners' investments in the firm

Joe spends an hour or more each day at work checking his Facebook page, Twitter account, and watching YouTube videos, even though it is against company policy to do so. Joe is guilty of which form of misconduct?

misuse of company time

What term best describes the American economic system ?

modified capitalism

Accounting equation

must always remain in balance so that assets always equal the sum of liabilities and equity.

Return on assets

net income / total assets

An economy in which economic activities occur between the country and the international community is a(n)

open economy

Dividents

outflows of cash or other resource paid to the stockholders.

An individual's values, principles, and standards of conduct are referred to as

personal ethics

Select from the following the four stages of social responsibility.

philanthropy financial ethics legal compliance

Which three factors characterize countries with low standards of living?

poverty high unemployment lower education rates

Data analytics

process of analyzing data to identify meaningful relations and trends.

By providing products that satisfy people's needs, a business hopes to satisfy its primary goal of earning a

profit

The primary goal of all businesses is to earn a , the difference between what it costs to make and sell a product and what a customer pays for it. (Enter one word in the blank.)

profit

A number of studies have found a direct relationship between social responsibility and Blank______ as well as a link that exists between employee commitment and customer loyalty.

profitability

Employees expect businesses to

provide a safe workplace keep them informed of what is happening in their company pay them adequately for their work

Fraud triangle

rationalization opportunity pressure or incentive

Statment of retained earnings

retained earning and dividends

Generally accepted accounting principles (GAAP) wants information to have:

revelance faithful representation

OSHA regulates the Blank______ of employees in the workplace.

safety

Which term refers to the level of wealth and material comfort that people have available to them?

standard of living

A better understanding of the many business activities that are necessary to provide satisfying goods and services comes from

studying business

Conducting activities in such a way as to provide for the long-term well-being of the natural environment is referred to as

sustainability

Jacinta has high individual moral standards and values but the opportunity still exists for her to engage in misconduct in her company. What key factor would keep Jacinta from behaving unethically?

the ethical behavior of her managers and co-workers

balance sheet

the statement reports: - assets, liabilities and equity at a point in time. - the financial position of a company at a point in time. - the equality of the accounting equation at any point in time

Accounting equation

the total of everything owned by a business must always equal the total of what the business owes to creditors and owners.

While unemployment is seen as an economic issue, it carries ethical implications when

the unemployment gap between rich and poor is large

When it comes to fairness and honesty, what two actions are expected of businesses?

to avoid harming customers, employees, clients, or competitors to follow applicable laws and regulations

As an area of workplace misconduct, theft of time includes engaging in activities that are not necessary for the job.

true

All of the following are questions to consider in determining whether an action is ethical except

will this activity further my career